The oil market was dominated by a sharp fall in prices this week. Disappointing results from all major economies are behind this decline. So far, the European ban on overseas imports of Russian oil does not seem to change this. However, easing of China's covid policy led to a slight correction at the end of the week.
This week the oil market suffered a sharp drop in prices. On Friday, December 2, the price of Brent oil was still at $85,57 per barrel. On Wednesday, December 7, the oil price stood at $77,71, the lowest price of 2022. On Thursday, December 8, the price corrected slightly and a barrel of oil cost $77,77.
The drop in oil prices is mainly the result of a sluggish economy. All major economies are currently struggling, causing demand for oil to lag behind. In the European Union, industry is running at half capacity due to high energy prices. In addition, China's production figures are the lowest in six months. The fact that demand for oil is also lagging behind in the US is also evident from oil inventories. For example, oil reserves in the US grew a lot faster than expected by 5.2 million barrels. According to analysts, it is an indication that demand in the country is lagging.
Import ban on Russian oil does not yet lead to higher oil prices
The European ban on overseas imports of Russian oil, which has been in force since Monday, December 5, does not yet appear to be raising oil prices. Because European countries traditionally import a lot of Russian oil, several analysts predicted that supply would come under significant pressure. As a result, oil and especially diesel could become scarce and expensive in Europe.
So far, Russia appears to be suffering from the ban. Since Thursday, December 1, the price of Russian Urals oil has fallen by 21%. However, it does not yet say that European oil prices will not rise. The oil reserves in the EU are currently still ample. In the long term, the loss of Russian oil could make it more difficult to replenish these reserves.
China relaxes Covid measures
The slight price increase on Thursday, December 8 is mainly the result of the relaxation of Chinese Covid measures. Until recently, China had the strictest Covid policy in the world. For example, infected Chinese had to serve their quarantine in a hotel and very strict lockdowns were imposed when infection rates were relatively low. For example, residents in an area that has been placed in lockdown were not allowed to leave their apartments at all. The strict Covid policy directly led to lower indirect oil demand, because no country consumes as much oil as China. With employees of the oil-intensive industry stuck at home and unable to work, the lockdowns lowered Chinese oil demand.
Despite a rapidly rising number of infections, China decided to relax the Covid measures on Wednesday, December 7. Since Wednesday, Chinese people have been allowed to serve their quarantine at home. In addition, Chinese no longer have to show a negative test to enter public buildings. This is the second round of relaxation in less than a month. According to analysts, these rapid relaxations mean that China, like many Western countries, is slowly but surely treating Covid as a dying virus.
Diesel prices continue to fall
The price of diesel fell for the eighth week in a row. Between Friday December 2 and Sunday December 5, the price for 100 liters of diesel was €136,29. After that the price dropped considerably. On Thursday, December 8, the diesel price had fallen to €127,66 per 100 liters.